Halliburton: Zacks’ Bull of the Day Play

One of the bright spots about being at Zacks is I get to see EPS trends develop before most other people. My boss keeps a meticulous database of EPS estimates and clues us in to moves as they develop. The big story heading into Q4 earnings has been the Trump rotation and the rally we’ve seen since Election Day. Hiding behind those headlines is 4.7% EPS growth on the S&P 500. If you dig a little deeper, you’ll see that the energy sector is set for 7.4% EPS growth. This bucks the trend of 8 consecutive quarters of contraction.

Further, onshore oil exploration and production expenditures have been estimated to increase by as much as 45% by some analysts. Nobody has gained more market share in this business than today’s Bull of the DayHalliburton (HALFree Report) . Halliburton is currently a Zacks Rank #1 (Strong Buy) in a sector that ranks in the Top 13% of our Zacks Sector Rank.

A big reason for the bullish Zacks Rank is the recent earnings estimate revisions to the upside from analysts. Five analysts have increased their estimates for the current quarter while eight have done so for next year. The most dramatic increase can be seen in next year’s consensus number. Sixty days ago, analysts were expecting 96 cents per share. Now they are expecting to see $1.12.

This underlying bullish sentiment can be seen in the stock chart which has rallied sharply off the lows of 2016. Increasing estimates have allowed the stock to make two distinct moves this year. The first was a bounce off a double bottom near $27 in February. That move took shares to $46.69 before running out of steam in June. A consolidation period developed from then until October when speculation of an OPEC deal helped boost oil prices. A second wave of optimism pushed shares through the top end of the consolidation range and on to a fresh 52-week high just shy of $57.

The stock appears to be in another consolidation here ahead of earnings due out Monday January 23rd before the market opens. With the commodity channel index coming down from an overbought condition over 100 and crossing over the zero line, a short term “Sell” signal was given. However, often times breakouts ignore this signal if there’s not follow through from the CCI lower and push higher. I’m bullish heading into the report.

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